Legislature(2023 - 2024)BARNES 124
02/01/2024 10:15 AM House ENERGY
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| Presentation: Alaska Energy Authority | |
| Executive Order 128 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
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ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 1, 2024
10:15 a.m.
MEMBERS PRESENT
Representative George Rauscher, Chair
Representative Tom McKay
Representative Thomas Baker
Representative Stanley Wright
Representative Mike Prax
Representative Calvin Schrage
Representative Jennie Armstrong
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION: ALASKA ENERGY AUTHORITY
- HEARD
EXECUTIVE ORDER: 128
-HEARD AND HELD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
CURTIS THAYER, Executive Director
Alaska Energy Authority
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation, titled
"AEA Overview and Programs Update."
CURTIS W. THAYER, Executive Director
Alaska Energy Authority
Anchorage, Alaska
POSITION STATEMENT: Discussed Executive Order 128.
BRANDON BREFCZYNSKI, Deputy Director
Alaska Industrial Development and Export Authority
Anchorage, Alaska
POSITION STATEMENT: Discussed the Alaska Industrial Development
and Export Authority's position on EO 128.
EMILY NAUMAN, Director
Office of the Director
Legislative Legal Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Summarized the Legislative Legal Services'
EO 128 Memorandum.
PARKER PATTERSON, Senior Assistant Attorney General
Civil Division
Department of Law
Juneau, Alaska
POSITION STATEMENT: Discussed the Department of Law's position
on EO 128.
ACTION NARRATIVE
10:15:52 AM
CHAIR RAUSCHER called the House Special Committee on Energy
meeting to order at 10:15 a.m. Representatives Baker, Schrage,
Wright, Prax, Armstrong, McKay and Rauscher were present at the
call to order.
^PRESENTATION: ALASKA ENERGY AUTHORITY
PRESENTATION: ALASKA ENERGY AUTHORITY
10:17:29 AM
CHAIR RAUSCHER announced that the first order of business would
be the Alaska Energy Authority presentation.
10:18:32 AM
CURTIS THAYER, Executive Director, Alaska Energy Authority,
provided a PowerPoint presentation, titled "AEA Overview and
Programs Update" [hard copy included in committee packet]. He
began on slide 2 and described the six areas that make up the
Alaska Energy Authority (AEA), including Railbelt Energy, Power
Cost Equalization (PCE) program, rural energy, renewable energy
and energy efficiency, grants and loans, and energy planning.
He provided a map, which showed AEA's active projects and
services throughout the state.
10:22:39 AM
MR. THAYER moved to slide 4 and explained that the Alaska Energy
Security Task Force has had over 60 subcommittee meetings, 11
task force meetings, and over 150 hours of public meetings; 8
energy symposiums have been created with 16 hours of on-demand
learning. Six subcommittees have created over 60 preliminary
actions including Railbelt, coastal, rural, state energy data,
incentives and subsidies, and statutes and regulations. He
noted that the task force report is the first major energy
security plan created in over 10 years.
10:24:09 AM
MR. THAYER mentioned that Representative Rauscher and Senator
Bishop participated on the task force. He discussed the Bradley
Lake Hydroelectric Project, which provides low-cost energy to
550,000 Alaskans. The annual energy production makes up 10
percent of Railbelt energy at 4 cents per kilowatt hour (kWh).
The AEA, in partnership with the Railbelt utilities, is studying
the Dixon Diversion Project, which would increase the annual
energy production of Bradley Lake by 50 percent or the
equivalent of up to 28,000 homes. The Dixon Diversion Project
would involve directional drilling of a 13-mile tunnel to move
water from Dixon Glacier into Bradley Lake. This would offset
1.5 billion cubic feet of natural gas per year. Construction
would occur from 2026-2030. He noted problems with transmission
line update needs.
10:27:32 AM
MR. THAYER, in response to committee questions, said that
preliminary water studies and permitting are underway. Drilling
to test rock formations for the tunnel is needed. The outcome
of these efforts will determine whether the project will move
forward. He clarified that the permitting process has occurred
on the Bradley footprint. He mentioned the Battle Creek
project, which was completed on time, on budget, and with
similar permitting. He said AEA doesn't anticipate any problems
with permitting and is confident that the project will be
completed by 2030. He noted that transmission upgrades are
needed and work is underway. Increasing water flow through the
Dixon diversion, raising the dam, and upgrading the transmission
lines would occur simultaneously.
10:32:36 AM
MR. THAYER moved to slide 7 and reported that AEA owns the 170-
mile Alaska Intertie transmission line that runs between Willow
and Healy. It is operated at 138 kilovolt (kV), was designed to
operate at 345 kV, is a vital link for transferring power
between northern and southern utilities, and saves Golden Valley
Electric Association customers an average of $37 million
annually. The Intertie provides benefits to Southcentral
customers through cost-savings and resilience to unexpected
events, like extreme cold. He noted the importance of redundant
lines in the event of an emergency.
10:34:58 AM
MR. THAYER, in response to Chair Rauscher, explained that the
Kenai Peninsula has some of the oldest transmission lines. The
Intertie was built in the 1980s to a higher standard and can be
upgraded more easily. Kenai Peninsula transmission line
upgrades would benefit Fairbanks consumers because more power
would be able to be moved.
10:36:36 AM
MR. THAYER moved to slide 8 and described the Power Cost
Equalization (PCE) program, which impacts 192 communities, 91
electric utilities, and almost 82,000 Alaskans. The program
provides a weighted cost average between Anchorage, Fairbanks,
and Juneau, which is about 20 cents per kWh. Anything above the
weighted average, PCE pays the difference. Residential
customers are eligible for PCE credit up to 750 kWh per month.
In 2024, AEA dispersed $48 million to rural electric utilities
for the benefit of our rural communities which is supported by
an endowment, not the general fund.
10:39:11 AM
MR. THAYER, in response to Chair Rauscher, explained that since
PCE, by statute, is formulated on the average weighted cost of
Anchorage, Fairbanks and Juneau power, if the cost decreased,
more money would be freed up by the PCE program to benefit rural
Alaska. If the cost of Railbelt energy goes up, then there is a
negative impact on the PCE. He described that financial
analysis and modelling is done to find cost-benefits, which
contribute to public good. Analysis is audited and made
available to the public. He clarified that programs like PCE
result in a lower cost of energy for Alaskans and don't
necessarily have a hard dollar return like a publicly traded
company. He said that AEA has created a digital data library
with 8,500 public-facing documents.
10:47:10 AM
MR. THAYER, in response to committee questions, said that the
PCE is funded by an endowment that is managed by the permanent
fund. Interest earned by the endowment pays for the PCE
program, followed by up to $30 million in community assistance.
He noted that there have been record earnings in recent years,
which creates a cascading effect that, up to the next $25
million, can be used in the bulk fuel loan program, power
houses, or renewable energy fund. He explained that prior to
legislation from about a decade ago, PCE competed for general
fund dollars, which wasn't always enough to pay for PCE. As the
endowment has grown, the ability to fully fund PCE has been
possible and often, but not always, fund some community
assistance. It has taken time for the endowment to reach the
point where returns go far enough to fully fund both PCE and
community assistance.
10:52:31 AM
MR. THAYER moved to slide 9 and described that rural Alaska
powerhouses are upgraded and maintained by AEA through leveraged
federal dollars. He noted 42 active rural power systems upgrade
projects and 34 active bulk fuel upgrade projects. Deferred
maintenance for rural power systems upgrades and bulk fuel
upgrades amounts to $1.1 billion. He noted that available
infrastructure dollars available from the federal government do
not qualify for rural Alaska because powerhouses utilize fossil
fuels. This is an ongoing challenge for AEA and that state.
10:56:02 AM
MR. THAYER, in response to Representative Prax, explained that
rural powerhouses are owned by the community. He said that AEA
steps in when there is an emergency and has strategically placed
backup generators around the state. He referred to slide 10 and
said that AEA has about $200,000 in emergency funding. He
mentioned that supply logistics is one of the biggest
challenges.
10:58:51 AM
MR. THAYER moved to slide 11 and said that the Renewable Energy
Fund Advisory Committee has forwarded a capitalization request
of $32 million for the legislature's consideration to fund 24
projects. Since the beginning of the program, $317 million has
been invested into the Renewable Energy Fund by the state.
There are 100 operational projects and 60 projects in
development. He reported that about 80 percent of the funding
ends up in rural Alaska.
11:00:53 AM
MR. THAYER, in response to committee questions, explained the
challenges and reluctance to open PCE eligibility. He
exemplified King Cove, which does not qualify for PCE and was
funded $3.8 million in grants. He said the goal should be to
incentivize renewables without penalty from PCE. He said PCE
was designed for rural communities to break even.
11:04:39 AM
MR. THAYER described the Power Project Fund (PPF) loan program
on slide 12 and said that recapitalizing will be necessary. The
loan offers competitive rates at about 5.4 percent interest, and
currently the program is in abeyance until additional capital is
secured for the pending applications under review what amount to
over $700,000. He described an outstanding loan on a
hydroelectric project. In response to Chair Rauscher, he said
that the legislature could capitalize the PPF loan fund. He
noted the success of the PPF program, which has no default and
projects across Alaska.
11:08:29 AM
MR. THAYER advanced to slide 13 and described the Grid
Resilience and Innovation Partnerships (GRIP). He reported that
AEA secured $206.5 million in federal funding for a high voltage
direct current submarine cable to go from Kenai to Beluga. This
requires a match of $206.5 million. This project would create
redundancy and reliability for Alaskans on the Railbelt. In
response to Chair Rauscher, he reported that AEA would have
eight years to complete the project. Funding must be identified
but is not necessary to be provided all at once. Unrestricted
General Funds or potentially a geo bond may be used. He also
mentioned potential reimbursement opportunities from the federal
government.
11:13:57 AM
MR. THAYER, in response to Representative Schrage, said that AEA
has worked with utility partners to discuss structure for
potential tax-credits to apply to projects to lower the cost to
the consumer. Sourcing equipment, workforce, and supply-chain
issues create challenges. He said that federal funding is
highly competitive and that upfront funding from the state sends
a message to the federal government about support for potential
match. He noted the governor's support for the project. He
explained that if funding was piecemeal overtime and the project
was incomplete in the time allotted, the federal government
would require a refund.
11:22:15 AM
REPRESENTATIVE PRAX commented that money is finite and public
scrutiny is inevitable with a lack of transparency.
11:23:25 AM
MR. THAYER described Railbelt transmission upgrades on slide 14.
He said that the $166 million bond financing comes at no
additional cost to rate payers. He reported that over the next
five years, Alaska will receive $60 million in federal formula
grants through the Grid Resilience Formula Grant Program through
the Infrastructure Investment and Jobs Act. He said that $22
million has already been awarded to AEA to support local
utilities. He provided an update to the State of Alaska
Electric Vehicle (EV) Infrastructure Implementation Plan on
slide 16. He remarked that Alaska had the best EV
infrastructure plan in the country and has unlocked millions of
dollars towards EV efforts.
11:26:13 AM
MR. THAYER explained, on slide 17, that AEA is collaborating
with the Alaska Housing Finance Corporation (AHFC) to distribute
Alaska's allocation of $74 million with no state match required
for home efficiency rebates, home electrification, and appliance
rebates.
11:26:59 AM
MR. THAYER described Black Rapids Training Site (BRTS) Defense
Community Infrastructure Pilot Program on slide 18. He said
that AEA partnered with Golden Valley Electric Cooperative to
acquire funds to extend a transmission line 34 miles along the
Richardson Highway to the (BRTS). On slide 19, he listed other
federal funding opportunities, including Energy Efficiency
Revolving Loan Fund, State Energy Program, Electric Vehicle
Charging Equipment Competitive, and State-Based Home Energy
Efficiency Contractor Training Grant Program. He concluded his
presentation on slide 20 and explained that the application is
pending for $100 million for the Solar For All Competition.
Funding may become available within six to nine months.
11:31:00 AM
MR. THAYER, in response to Chair Rauscher, said a plan was
developed for EV infrastructure before money became available.
The alternative fuel corridor from Anchorage to Fairbanks was
created and chargers were deployed at site hosts at local
facilities. He offered to provide the committee with the 100-
page plan for addressing EV implementation throughout Alaska.
11:32:56 AM
CHAIR RAUSCHER thanked Mr. Thayer for his presentation.
11:33:28 AM
The committee took an at-ease from 11:33 a.m. to 11:35 a.m.
^EXECUTIVE ORDER 128
EXECUTIVE ORDER 128
11:35:48 AM
CHAIR RAUSCHER announced that the final order of business would
be Executive Order 128.
11:37:05 AM
CURTIS W. THAYER, Executive Director, Alaska Energy Authority,
discussed Executive Order (EO) 128. He explained that the
governor believes it is in the best interest for an efficient
administration to separate memberships of the board of directors
for the Alaska Energy Authority (AEA) and the board of directors
of the Alaska Industrial Development and Export Authority
(AIDEA). He noted that both authorities have different missions
and reported that the capital budget for AEA has increased by
1000 percent in the last four years and is expecting to continue
to grow. Currently, just one volunteer board oversees two,
multi-billion-dollar organizations. A distinct set of expertise
is necessary for the governance of each organization. He
mentioned working with the legislature to manage staffing for 68
positions. He described the governor's proposed makeup of the
boards regarding specific expertise. Billions of dollars and
many projects of the AEA board would benefit from a board that
can provide strategic vision.
11:43:21 AM
REPRESENTATIVE PRAX asked if a bill is necessary.
MR. THAYER responded that the vehicle by which the boards are
separated is a decision for the governor and legislators to
make.
CHAIR RAUSCHER mentioned a representative from AIDEA will speak
to EO 128 from their point of view.
11:44:51 AM
REPRESENTATIVE SCHRAGE asked whether someone from Legislative
Legal Services was available to answer questions.
11:45:07 AM
CHAIR RAUSCHER affirmed Legislative Legal Services'
availability, thanked Mr. Thayer, and welcomed the next speaker.
11:45:59 AM
BRANDON BREFCZYNSKI, Deputy Director, Alaska Industrial
Development and Export Authority, discussed AIDEA's position on
EO 128. He said the executive order does not impact AIDEA's
mission or statutes.
11:46:48 AM
REPRESENTATIVE PRAX sought to clarify if AIDEA is in the
"banking business," while AEA is in the "electricity business."
MR. BREFCZYNSKI affirmed that AIDEA can lend money for a broader
range of efforts beyond AEA.
11:47:21 AM
REPRESENTATIVE SCHRAGE asked whether there will be fiscal
ramifications or employee issues because of EO 128.
MR. BREFCZYNSKI answered there would be no fiscal impact to
AIDEA or AEA; shared services between AIDEA and AEA would remain
intact.
MR. THAYER agreed and said there is a memorandum of
understanding (MOU) that shows how the two organizations operate
which will not be affected by the executive order. Shared
services are billed according to appropriate agencies. He noted
that board members are not compensated. The cost would be
$28,000 to cover per diem.
REPRESENTATIVE SCHRAGE asked about the current structure of the
shared AIDEA/AEA board and whether members are appointed.
MR. THAYER explained that the board members are appointed by the
governor for two-year terms.
11:51:29 AM
REPRESENTATIVE SCHRAGE referenced the legal services memo and
voiced his concern for the constitutionality of this executive
order.
11:52:34 AM
EMILY NAUMAN, Director, Legislative Legal Services, Legislative
Affairs Agency, summarized the Legislative Legal Services' EO
128 memorandum. She said that EO 128 likely exceeds the
governor's executive authority under the Alaska Constitution.
She cited Article 3, Section 23, which read as follows:
The governor may make changes in the organization of
the executive branch or in the assignments of
functions among its units which he considers necessary
for efficient administration. Where the changes
require the force of law, they shall be set forth in
executive orders.
MS. NAUMAN explained that governors have used executive orders
to transfer functions from one department to another; however,
there is little meaningful authority that sheds light on the
permissible scope of an executive order. She pointed out that
just because an executive order has been implemented in the
past, does not mean that it is legally permissible.
MS. NAUMAN said the power of an executive order is not without
bounds and one branch of government is prohibited from
encroaching on the existing powers of another branch. She said
in the case of EO 128, the EO changes the composition of the
board entirely and no where else in law does the board exist.
This EO creates new law outside of the scope of a simple
reorganization or function change. She said that this is an
unconstitutional encroachment on the legislature's lawmaking
authority that exceeds the governor's limited power to amend
statute as necessary to reorganize the executive branch.
MS. NAUMAN advised that the most appropriate action is to
disapprove the executive order. The constitutional method of
creating a new board would be through the passing of a bill
through the legislative process.
11:55:49 AM
REPRESENTATIVE SCHRAGE asked to hear from the Department of Law.
MS. NAUMAN, in response to Representative Rauscher, reviewed
that EO 128 automatically takes effect if the legislature does
not meet in joint session to disapprove it via a resolution
within 60 days of the beginning of session, by March 15, 2024.
CHAIR RAUSCHER asked about the monetary value of challenging
inaction in court.
MS. NAUMAN said the amount would depend on the action being
challenged and noted the potential for hundreds of thousands of
dollars in attorneys' fees.
11:58:00 AM
REPRESENTATIVE PRAX asked about the risk of "lawfare." He
suggested moving forward with a bill and avoiding risk.
CHAIR RAUSCHER offered his opinion that the outcome may be the
same if a bill was put forward; time and money could be saved by
allowing EO 128 to take effect.
REPRESENTATIVE SCHRAGE asked whether there is merit to dividing
the boards. He expressed his concern that by allowing EO 128 to
take effect, the legislature would cede power to the governor.
He further expressed the potential for a lawsuit from a citizen
who feels the governor has stepped out of line of the
legislative process. By arriving at the result through proper
process and scrutiny through a bill, litigation risk may be
eliminated and proper separation of powers would be kept in
check.
12:01:00 PM
PARKER PATTERSON, Senior Assistant Attorney General, Civil
Division, Department of Law, discussed the Department of Law's
position on EO 128. He described a disagreement with the MOU
from Legislative Legal Services. He referred to Article 3,
Section 23 of the Alaska Constitution, which creates powers of
the governor to make changes in the reorganization of the
executive branch and the assignment of function among its units.
He stated that Section 23 is a grant of positive legislative
power to the governor. The governor cannot create or destroy
functions, he can only move those functions around existing
units of the executive branch. However, he has the power to
change the organization of the executive branch, which may
entail creating, modifying, or eliminating units. To do so he
must create new law through an EO. When an EO creates a new
unit, it must set forward the minimum criteria necessary to
establish the unit so it can be constituted in function. He
emphasized that it is necessary and appropriate for the EO to
establish membership and qualifications of members to be
appointed. He described similar provision in Michigan's state
constitution. He stated that DOL has interpreted that this EO
is an appropriate exercise of the governor's power and would
pass judicial scrutiny.
12:07:22 PM
REPRESENTATIVE ARMSTRONG asked Mr. Patterson for a memorandum
("memo") that references the Michigan case law that he
mentioned.
MR. PATTERSON offered to follow up.
REPRESENTATIVE PRAX asked whether "this is a battle worth
fighting given the merits of the underlying issue."
MR. PATTERSON deferred to the governor's office.
REPRESENTATIVE SCHRAGE asked Ms. Nauman about precedent for the
validity of EOs.
MS. NAUMAN reiterated that if an EO has been enacted in the past
it does not mean that the action is legal or complies with the
constitution, and it could still be challenged in court.
REPRESENTATIVE SCHRAGE thanked Chair Rauscher.
12:10:12 PM
CHAIR RAUSCHER announced that EO 128 would be held over.
12:10:47 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at [12:11]
p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2024.01.31 AEA Overview and Programs Update Presentation to House Energy Committee (Final).pdf |
HENE 2/1/2024 10:15:00 AM |
AEA |
| exor0128.pdf |
HENE 2/1/2024 10:15:00 AM |
EO 128 |
| Legislative Legal EO 128 Memo.pdf |
HENE 2/1/2024 10:15:00 AM |
EO 128 |
| EO 128 Letter to Rep Rauscher.pdf |
HENE 2/1/2024 10:15:00 AM |
EO 128 |